Strong US Retail Sales May Keep Dollar Bullish Traders On Top

Contestant number 1 continues to dominate, as he has held the top spot for the past 3 days and ended Wednesday with a portfolio balance of $249,699.90. However, this is actually lower than his balance on Tuesday, as he lost money trying to sell EUR/USD and GBP/USD on Wednesday morning, when both pairs rallied. Nevertheless, contestant number 1 is so far ahead of the other contestants that it would take a significant loss to even put his position at risk. Furthermore, our leader looks set to make up for his recent losses as he entered a long USD/JPY position last night just below 107. The pair is already up over 100 points and contestant number 1 is floating more than $20,000 in profits. While it is not actually considered a “profit” until the position is closed, this trader has the release of US Advance Retail Sales working in favor of dollar bulls.

Indeed, according to the US Commerce Department, retail sales rose by the most in 6 months during May, as the index jumped 1.0% from the month prior. Excluding autos, this figure was even more optimistic as the index surged 1.2%. A breakdown of the report shows broad-based gains, but the most notable change was in the gasoline station component, which increased 2.6% from a month ago and 15.3% from a year earlier. Since this report is not adjusted for inflation, this rapid increase skews the headline reading a bit, as average gasoline prices in the US steadily rose above $3.50/gallon toward $4/gallon over the course of May. Nevertheless, nearly every other component showed improvements as well, including building materials (+2.4%), general merchandise (+1.2%), and electronics (+0.7%). The news will help to alleviate some of the bearish sentiment on the US economy as consumption – which accounts for roughly 70% of GDP – rebounds despite deteriorating labor market conditions and withering consumer confidence. Meanwhile, the US Import Price Index jumped 17.8% in May from a year earlier – the sharpest gain since record-keeping began in September 1982 – as the weak US dollar makes foreign goods more expensive. Overall, it is clear that rising prices remain a problem, which could constrict spending going forward but will likely leave the Federal Reserve maintaining their hawkish stance.

Contestant number 2, on the other hand, reaped her most recent gains by shorting USD/CHF on Wednesday, leaving her with a closing portfolio balance of $197,822.34. Like USD/JPY, the USD/CHF pair tumbled over the course of the day on Wednesday as the markets were widely risk-averse as crude oil rocketed higher and the DJIA plummeted over 200 points. However, she does not have any positions open right now, and as we’ve seen throughout the contest, it takes active trading to stay in the top 3.

On the other hand, contestant number 3 has maintained his spot despite the fact he only gained a few hundred dollars on Wednesday and ended the day with a portfolio balance of $181,532.14. This contestant prefers to trade GBP/JPY on a very short-term time frame, and while he had a few very profitable trades, he had enough small losing positions to erase most of his gains. Currently, contestant number 3 is holding a large long GBP/JPY position, which he bought at 209.76. The pair is currently trading within a tight range, and we tend to find that consolidations like these lead to massive breakouts. As a result, where GBP/JPY goes today will likely determine this trader’s spot in the top 3 tomorrow, as a drop lower will easily take a chunk out of his portfolio balance.

Congratulations to our top traders and good luck!

Terri Belkas, Currency Analyst of